Top 3 Regulation U-turns in Crypto
Many countries have tried and failed to introduce sensible regulation for crypto projects – here we look at which countries, who although initially sceptical, have since changed their tune and have since introduced some of the most crucial regulations.
As cryptocurrencies are still relatively nascent, it is likely that projects are to be subjected to more standardised regulatory frameworks in the future. But for now, regulation is still thin on the ground in many countries. Here are three countries we believe have stepped up to the mark after showing initial reluctance to integrate digital assets into their economies.
The US does not have unified regulation on crypto. The Federal Government has dragged its heels on the issue ever since the emergence of cryptocurrencies, however, there are varying degrees of regulation in different states.
In 2014, California became one of the first states to introduce protections for consumers, by ensuring that digital currencies could be used to pay for goods and services.
This is no surprise of course – the sunshine state has long been home to Silicon Valley and a pioneer in new technologies.
By getting ahead of the regulatory curve, California has established itself as a leading place for crypto projects.
Consequently, it is the headquarters of several high-profile crypto exchanges and companies as a consequence, such as Coinbase, Kraken and Ripple.
Further changes are afoot in the US, with Congress suggesting at the end of last year that they may introduce new legislation on the federal level at some point over the course of 2020.
China has also had a mixed relationship with crypto.
The Chinese Government has fully embraced the underlying blockchain technology and on the 1st January 2020, a new legislative framework was put in place for blockchain projects –coming off the back of President Xi’s plan to integrate blockchain technology into how the country is operate in the future, presumably by applying many of the use-cases that blockchain has proven to be capable of improving, such as the agricultural industry.
In terms of cryptocurrencies, China is both a world leader and one of its harshest critics.
Crypto exchanges and trading of cryptocurrencies was essentially banned in September 2017, however, China is also home to the largest Bitcoin mining pools in the world – due to the relatively cheap electricity combined with the enormous population of the country.
In addition to this, China also has what is known as the ‘great firewall’ which essentially censors sections of the internet for Chinese residents, including sites like Google, Facebook and YouTube. To get around this, Chinese residents use VPNs (Virtual Private Networks) to access the internet using a proxy server based in another country.
Therefore, although China’s government has essentially stifled the crypto industry within the country, a significant minority of its people are likely to continue to mine, trade and hold cryptocurrencies despite the government ban.
China is also poised to be the first country to launch its own cryptocurrency, the Digital Yuan, with plans to trial the project in four Chinese cities: Shenzhen, Chengdu, Suzhou and Xiongan, and full rollout is said to be on the horizon in the next one to two years, potentially ‘opening the floodgates for regulators.’
In April 2018, the Reserve Bank of India (RBI) said it would “not deal with or provide services to any individual or business entities dealing with or settling [virtual currencies].”
The RBI claimed that issues surrounding consumer protection, market integrity and money laundering were key reasons for turning its back on cryptocurrencies.
The ban was lauded inside the crypto community as unenforceable, with some citing the combination of the authorities’ inability to effectively police decentralised assets, and the presence of exchanges such as Bitmex, which allow new users to sign up without Know Your Customer (KYC) verification.
However, more recently, India has embraced blockchain and crypto projects and reversed the ban as part of its future industrial strategy called ‘Digital India.’
How developing countries embrace and implement regulatory framework could potentially have a major impact on the future direction of crypto industries, as passing laws in countries like China is a much faster process than using the democratic channels seen in western countries, like the US and most of Europe.